The decision to reaffirm any debt in your bankruptcy is very serious and should not be taken lightly. There are several factors that should go into your decision whether or not to reaffirm an auto loan in your bankruptcy:

1. Do I have any equity in the vehicle?

If you owe more money on your car than you can sell it for, or trade it in for, then why would you want to take financial responsibility for the loan after your bankruptcy? We often see people who unknowingly reaffirm their auto loan with $8,000 negative equity or more. If you have that kind of negative equity, and you reaffirm, you are going to have that vehicle for a very long time…unless you decide to use $6,000-$8,000 cash for down payment on your next car. Needless to say, reaffirming your current auto with negative equity is a bad idea. Bankruptcy exists so that you can get out from under debts like an upside down auto loan.

2. Can you get approved for a new auto loan?

Due to life changing events, sometimes you might not be able to buy a vehicle right now. If you NEED a vehicle to get around, and you cannot get approved for a new loan, maybe you should reaffirm your car.  If you are concerned about getting approved for an auto loan after filing bankruptcy, you should apply at www.autoloanbankruptcy.com to find out your options.

3. Is your auto loan at a Credit Union?

Credit Unions use something called cross-collateralization which can make it tougher to discharge their debt into a bankruptcy. Basically, if you have other debts or assets with that Credit Union, they can group it all together. If you have a home loan, a car loan, a credit card, and a checking account with a Credit Union, you cannot decide to keep the house and the checking account, but let the car and credit card go in the bankruptcy. It is more of an “all or nothing” philosophy.  Just be sure to empty out your checking/savings at your Credit Union prior to filing bankruptcy if you are letting any of their accounts be put in your bankruptcy.

4. Can you afford the monthly auto loan payment?

If you have equity, you could get a new loan if you wanted to, you need to be able to afford the car payment, right? We see people reaffirm $500-$700/month payments that cannot afford them. Remember, your bankruptcy is your opportunity to set yourself up for success.